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Legislators try to put budget together without knowing how much state will receive from ARRA

‘It’s like playing golf in the dark’

The $780-billion American Recovery and Reinvestment Act (ARRA) President Barack Obama signed into law in February is a massive, complex piece of legislation that most members of Congress admitted they had not read or did not fully understand before voting on it.

The rules and guidelines the bill gives states on how to spend the money they are due are just as cumbersome.

With deadlines for appropriations bills this week, and with the stimulus dollars taking a deliberate pace in arriving, something had to give.

Mississippi lawmakers agreed late last week to extend appropriations deadlines and adjourn Tuesday. The budget is one of the last things legislators complete before the end of the regular session.

This year will be no different. The state will still need a budget for fiscal year 2010, which starts July 1. It just won’t get put together until a little later than usual.

Crafting a budget without a good idea of where and how much stimulus money will go would have been, at best, akin to playing golf in the dark. “That’s very true,” said Sen. Terry Burton, R-Newton, who sits on the Joint Legislative Budget Committee, the body that adopts revenue estimates that set the parameters for the state’s budget. “We don’t know what kind of flexibility we will have as far as using that to plug some holes. The timelines just aren’t lining up for us. It makes perfect sense to do that instead of having a special session that would cost the taxpayers.”

After adjourning, legislators will return the first part of May.

Their hope is, by then, the roadmap for spending Recovery money will be a little clearer.

What has become crystal clear the past couple of weeks is that the state will have to craft FY10’s budget with $403 million less than originally anticipated. State tax revenues have declined dramatically as businesses suffer and unemployment rises.

“(Revenue estimates) look terrible,” said Rep. Dirk Dedeaux, D-Perkinston, who chairs the Medicaid Committee that handles legislation for the state agency that stands to benefit from stimulus money. “There are so many unknowns out there as it relates to what our budget is like. People are reluctant to talk about new revenue when they haven’t seen the stimulus, and they’re reluctant to commit to a certain course of action until they know for certain what the shortfall is going to be. This is something that will be resolved with time. That’s what the delay is about.”

State economist Dr. Phil Pepper said the latest revenue estimate for 2010 was made with the $2.8 billion the state will receive from the ARRA incorporated into it.

Whenever a state’s budget has been slashed the way Mississippi’s has, what usually draws the most attention is the possibility that state services – such as Medicaid and education funding – will suffer or state agencies will have to shed payroll.

“I don’t believe, at the end of the day, that we’ll see any reductions in state services or any kind of massive layoffs,” Burton said.

Even with the federal government making up some of the financial difference, Dedeaux admits that the only solution for the budget is a combination of increased revenue or what he called “draconian cuts” to departments and agencies. “The likelihood is that we’re going to have to do both. The problem is, there is no fatted calf anywhere, unless you’re looking at the rainy day fund, which people don’t seem too excited about dipping into,” he said.

One potential source of revenue is an increase in the state’s cigarette tax. Legislative leaders were in search of a compromise late last week to the $1 tax that passed the House and the 55-cent tax the Senate cleared.

Gov. Haley Barbour has warned lawmakers that revenue from a cigarette tax increase would be unpredictable.

“We’ve got to make some tough choices,” Burton said.

Clay Chandler is a staff writer for the Mississippi Business Journal and covers the state Legislature. Contact MBJ staff writer Clay Chandler at clay.chandler@msbusiness.com .

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